5 common reasons why start-ups fail to secure Dragons’ Den investment
Supported by Startups.co.uk coverage, research shows financial inaccuracies are the biggest downfalls for entrepreneurs on the Den
Analysis of the last three series of the BBC show Dragons’ Den reports that lack of financial knowledge and legal documentation are among the common reasons why budding entrepreneurs fail to secure investment when pitching to the Dragon investors.
Geniac’s research – supported by coverage of the show on Startups.co.uk – shows that 56% of start-ups that appeared in Series 11 to Series 13 went home empty-handed despite the fact that over £3.7m was invested across the three series.
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The five typical reasons as to why each pitch failed were:
- Poor grasp of business finances – Pitches were found to often fail when challenged on key business numbers, the business had been over-valued, or there was found to be no path to profit
- Failure to produce legal documents – For instance, a product entrepreneur might not have an appropriate patent or have a water-tight agreement with a retailer
- Bad management style – When the founder’s management style and ability came into question
- Unconvincing product – Where the investors don’t see market potential for a particular product
- Negotiations breaking down – Where the entrepreneur pitching was unable to come to an agreement with an investor regarding the amount amount of equity and price
On the flip side, 40% of successful entrepreneurs that appeared in the Den have received funding largely because the Dragons had been assured by solid financial reports.
33% earned investment because the investors believed in their product while 17% of founders had been able to “tame the Dragons” by giving an “inspiring and professional performance”.
Mike Galvin, co-founder of Geniac, said:
“We believe that no one is too small to be big so we’re great fans of Dragons’ Den. The series is a reminder of the importance of key business fundamentals for starting and growing a business. [But] it is alarming to see the high number of basic errors made by entrepreneurs and small business founders making the pitch of their lives.”
If you’re looking to secure investment, read this guide on how to nail a funding pitch first time.